Private Health Insurance: Challenges for Reform

1
Private Health InsuranceChallenges for Reform

• Karen Pollitz
• Research Professor
• Georgetown University Health Policy Institute
• Alliance for Health Reform
• October 3, 2008

2
Some basics

• We dont buy health insurance in case we stay
  healthy
• For insurance to protect us, it must be
• Available
• Affordable
• Adequate
• Always

3
Sources of health coverage, non-elderly

• 71 of uninsured are in full-time working
  families
• 2/3 of uninsured are poor or near-poor (below
  200 FPL)
• Most uninsured are ineligible for ESI or Medicaid
  
• 1/3 of non-elderly will have spell uninsured over
  4-year period

Employer, Dependent30
Uninsured18
Employer,Own32
Medicaid/Other public 15
Individual Policies5
Total 255 million people under 65
Source Urban Institute estimates of March 2006
Current Population Survey, U.S. Census Bureau.
4
Risk spreading
Concentration of Health Spending in the U.S.
Population
Note Population includes those without any
health care spending. Health spending defined as
total payments, or the sum of spending by all
payer sources. Source Agency for Healthcare
Research and Quality, Medical Expenditure Panel
Survey, 2003.
5
Availability challenges

• Job-based plans
• ESI is voluntary
• Eligibility cannot be based on health status
• Individual health insurance
• Medically underwritten in most states,
  eligibility is based on health status

6
Always available?

• Job based plans
• Loss of eligibility due to layoff, retirement,
  change in family status, employer drops benefits
• Continued eligibility cannot be based on health
  status
• Individual health insurance
• Ability to switch plans limited if health
  declines
• Rescission

7
Affordability challenges

• Job-based plans
• Average price (4,000/12,000) reflects broad
  pooling, comprehensive benefits
• Significant tax subsidies
• Significant employer subsidies
• Individual health insurance
• Price based on health status, age, industry
• Price varies dramatically
• Few subsidies

8
Affordability always?

• Job-based plans
• Medical costs rise faster than wages, straining
  affordability over time
• Experience rating hikes price of employer group
  policies when claims are made
• Employee contribution must not be based on health
  status
• Individual health insurance
• Premiums rise with age, change in health status
• Durational rating penalizes policyholders who
  stay
• Other renewal and marketing practices strand sick
  in policies whose premiums spiral

9
Adequacy challenges

• Job-based plans
• Generally comprehensive benefits (varies)
• Cost sharing is increasing
• Individual health insurance
• Benefit exclusions, caps
• Pre-existing conditions permanently excluded
• High cost sharing

10
Adequacy always?

• Job-based health plans
• Gradual erosion of coverage, mostly through
  increased cost sharing
• Individual health insurance
• Policyholder option to trim coverage, raise
  cost sharing to offset renewal premium increase
• Policyholder option to increase coverage often
  restricted

11
Many approaches to reformbut not just anything
will do

• Public vs. Private Coverage
• Single vs. Multiple Payers
• Federal vs. State
• Competition vs. Regulation
• Beginning discussion with the 4 As can shape
  design of any of these approaches